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. Last Updated: 07/27/2016

Telenor Says It Will Not Pay Damages in Lawsuit

OSLO -- Norwegian telecom group Telenor on Wednesday said it had appealed against a $1.7 billion award by a Siberian court in a lawsuit over VimpelCom and said it has "no intention of paying" the damages.

Telenor said it had lodged the appeal with a court in Tyumen.

Little-known VimpelCom shareholder Farimex alleged that Telenor caused losses to VimpelCom by delaying its purchase of Ukrainian mobile operator URS, and a court in Omsk last month backed its claim and ruled that Telenor should pay VimpelCom compensation.

The Omsk court ruling followed a long struggle by Telenor to protect its nearly 30 percent holding in VimpelCom, Russia's No. 2 mobile operator, from what it has called a groundless encroachment into its ownership.

"The Omsk court's decision contains grave substantive and procedural errors, and we have no intention of paying any claimed damages based on this ruling," Telenor vice president Jan Edvard Thygesen said in a statement.

"We are confident of our position and believe Russia's higher courts will acknowledge the gross violations of law ... the risk of permitting a dangerous precedent to stand and ... will reverse the decision and dismiss Farimex's claim."

Court documents showed that British Virgin Islands-based Farimex owned 0.002 percent of VimpelCom shares when it filed the suit against Telenor in April 2008.

Telenor believes that Farimex is linked to Mikhail Fridman's Alfa Group, the other main owner of VimpelCom whose companies are involved in a number of court cases against Telenor.

Alfa Group denies any connection to Farimex.

Foreign companies have been concerned about investing in Russia, and foreign capital has flowed out of the country as the global financial crisis has deepened.

Kremlin-backed companies have in recent years strong-armed "strategic" energy projects away from foreign firms.

Telenor said its VimpelCom board members opposed the 2005 URS purchase because URS was overvalued, had "no credible business plan" and because the deal lacked transparency.

"To date, the identity of the beneficial owners of the sellers of URS have not been disclosed," Telenor said.

It said that despite more than $600 million in investments by VimpelCom in URS, the firm was still in the red on Dec. 31, 2008, and it only had a 4 percent market share, according to information from telecoms market consultants AC&M.

"We have filed our appeal and will file whatever other documents are necessary to prevent Alfa Group or Farimex, using this illegal decision, from stealing our VimpelCom shares and undermining foreign investments in Russia," Thygesen said.